Post by Pardeep Maheshwaree
The two concepts provide complementary but distinct views about positioning a company in a business landscape at a place which is not only profitable but also less contested. Both of these concepts have roots in the reconstructionist approach, which defends the ‘strategy shapes the structure of industry’ paradigm.
Blue ocean strategy refers to a school of strategic thinking where one escapes competition by making it irrelevant, essentially by focusing on delivering value which no one is currently offering effectively in the market. This is attained by tapping into latent demand of customers or by shifting the ‘value’ parameters in the industry e.g. as done by Apple in smartphones by moving the emphasis from technological advancements to user-experience, thus shifting the industry paradigm. However, providing more value (differentiation) alone does not necessarily guarantee success in the long run, one also has to lower the cost structure at the same time. Thus, by pursuing differentiation as well as a low-cost strategy and delivering value (based on untapped demand) companies can reconstruct the market.
In order to find a blue oceans, companies need to break-away from contemporary strategic thinking which has over-emphasised competition benchmarking. This is not to suggest that companies should avoid benchmarking competitors, but rather they have to focus more on customer needs and novel value-creation opportunities. Blue ocean strategies are not necessarily about technological innovation but often the novelty in linking of technologies to buyer’s value. These strategies typically accompany a different business model and this is why they cannot be easily imitated. It is always hard to imitate completely new business models due to the cognitive barriers of incumbents to novel approaches. Thus, competition is more likely to respond by strengthening their existing business model and lose share in the renewed market.
High value of shaping strategies
In contrast, SHAPING STRATEGIES are focused not on the strategic moves to create a new market but on orchestrating a business ecosystem where all the participants benefit. As suggested by Hagel et al. (2008) this can be achieved by companies which could: communicate a shaping view (future view of the industry with opportunities for all participants), develop a shaping platform (a set of standards and practices that organise and support participants’ activities) and shaping acts & assets (signalling their capabilities for success through their own acts). Ikea’s success is a good example of a shaping strategy. The shaping view that Ikea brought forth was a new way of doing business –by re-conceptualising the whole furniture businesses through a novel value system. Ikea also created a platform for its partners to operate on, by a) supporting suppliers with equipment and technical assistance in order to improve their business infrastructure and manufacturing standards and b) providing customers easy to use instructions to assemble their own furniture, thereby lowering costs. Ikea’s acts and assets include its orchestration capabilities, efficient warehousing and logistics, customer support and store layout amongst others, all of which strengthen its vision and reliability.
In an era where technological advancements have created immense opportunities, it is imperative that value systems be reconfigured. It will be the market-shapers who will have the most profitable position in the reconstructed markets. The prerequisite for it is a shift in strategy practitioners’ belief system from strategy following structure to strategy shaping structure.
References: Kim, W.C. & Mauborgne, R. 2004. Blue Ocean Strategy, Harvard Business Review, 82(10), pp. 76-84. Hagel, J. Brown, J.S., & Davison, L. 2008. Shaping Strategy in a World of Constant Disruption, Harvard Business Review, October, pp. 81-89